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Pennsylvania State Senate
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MEMORANDUM

Posted: May 15, 2015 10:44 AM
From: Senator Sean Wiley
To: All Senate members
Subject: Comprehensive Gaming Legislation
 
In the near future, I will be introducing comprehensive legislation to move the commonwealth's gaming industry forward. Since passage of Act 71 of 2004, the Race Horse Development and Gaming Act, the commonwealth's gaming industry has been an overwhelming success.  The addition of table games in 2010 further enhanced the industry.  Legalized gaming has resulted in thousands of new jobs and billions in property tax relief and economic development throughout Pennsylvania.  It has saved the commonwealth’s horse racing industry.
 
The gaming industry is constantly changing and we have to be flexible in our approach by allowing the industry to evolve without sacrificing the strict regulatory environment in which it operates. My legislation would:
 
● Place a seven year moratorium on awarding remaining gaming licenses. This would effectively prohibit issuance of the remaining Category 1 license and the third Category 3 license authorized in 2017 until 2022. During this time, the Pennsylvania gaming market will mature so regulators can make informed decisions about market saturation in the future.
 
● Decouple the remaining Category 1 license from a race track license. The proposal would allow the board to seek applications for a Category 1 or Category 2 license in 2022; provided that the holder of a race track license would receive priority in a competitive application process in order to effectuate the original intent of the act.
 
● Remove the prohibition on acquiring more than 1/3 of a second casino license. This prohibition was originally included Act 71 to prevent monopolization of licenses. The provision was successful in that ownership of casinos is not concentrated in one or two operators. However, the changing nature of the gaming industry may make this provision problematic in the future in the event the number of viable operators decreases.
 
● Allow Category 3 licensees to petition the PGCB for additional machines in increments of 10 @ $15,000 per machine based on established need in 2022.
 
● Remove the table game tournament restrictions on Category 3 licensees.  Current law limits tournaments to 15 tables one day per month.
 
● Legalize online poker through our existing casinos.  My proposal would allow the PGCB to authorize online poker only after conducting a study to determine the impact online gaming would have on existing brick and mortar casinos.  This would effectively grandfather Pennsylvania in should there be changes to federal law re: online gaming. 
 
Under my proposal, online poker would be available for play no sooner than Jan 1, 2017 with regulations, licensure, etc. effective no sooner than 7/1/16.  I am proposing a $500,000 online gaming license fee and a tax rate of 36% on online poker revenues, of which 34% will be used to fund a school district property tax freeze for senior citizens and 2% will be used to promote the Commonwealth’s horse racing industry and live horse racing.  In addition, the first $10 million of online gaming tax revenues would be used to fund a casino investment grant program for a five-year period.
 
● Authorize casinos to conduct fantasy sports competitions in an effort to increase foot traffic at the venues.  Sports betting would remain illegal as it’s currently prohibited by federal law.
 
● Increase funding for the Law Enforcement Grant Program from $2,000,000 to $5,000,000 and expand eligibility to all law enforcement activities rather than just gaming related activities.  This program has been underutilized in the past mainly because of its restrictive nature.
 
● Create a Casino Reinvestment Grant Fund to encourage expansion, renovation, etc. of our licensed gaming venues.  Casinos will be able to apply for grants to cover costs associated with hotel construction/expansion or amenity construction/expansion at the facility.  Grant monies will not be available for the original construction of a facility or temporary facility.  The amount of the grant would be capped at 10% of the total project cost or $1 million, whichever is lower.  The fund will be capitalized from revenues from online gaming in the amount of $10 million per year for 5 years.  This $50 million pool of investments funds is designed to spur millions of additional investment by our casinos.
 
● Make gaming entities eligible applicants for the Commonwealth’s economic development programs in order to spur investment and job creation.  Casinos would remain ineligible for KOZ, CRIZ and similar tax exemption programs but would be eligible for other DCED and CFA programs focused on economic development and job creation and retention.
 
● Provide casinos with flexibility in the sale of liquor by allowing purchase of a special permit.  This permit would not extend the total number of hours during which alcohol could be sold but would allow, with PGCB and LCB approval, the casino to adjust the hours during which it may sell alcohol.  The proposed permit fee is $250,000 with an annual renewal fee of $50,000.  The proposal would also eliminate the provision that allows casinos to offer drinks free of charge only to those actively playing a slot machine or table game.
 
● Revise current criminal penalties in the Act to ensure constitutionality.  Recently, the Pennsylvania Supreme Court declared certain fines in the Act as unconstitutional as excessive.  My legislation would re-enact those fines in a constitutional manner.
 
● Provide that self-reporting of a violation of the Act by casinos would be a mitigating factor in any sanction imposed by the PGCB.  Casinos are required to self-report violations but whether that self-reporting is considered by PGCB in meting out punishment is unclear.  This proposal would provide that necessary clarity.
 
● Increase funding for compulsive gambling treatment by $1,500,000 and drug and alcohol treatment by $500,000 to combat the adverse social impacts of gaming.  Under my proposal, both programs would be funded at $3,500,000 annually.
 
● Deposit all table games tax revenue in the Property Tax Relief Fund beginning July 1, 2017 to increase funds available for school district property tax relief.  Current table game taxes are deposited into the General Fund.
 
Pennsylvania’s gaming industry has become a vital part of our economy and our public policy needs to reflect that reality.  With the ever-changing nature of the gaming industry, Pennsylvania needs to be flexible in its approach to gaming to ensure that our industry does not suffer the same fate that is occurring in New Jersey.  We also need to understand that the industry is not an easy and endless source of revenue for the commonwealth as we deal with our current budget issues.  The debate over expanding gaming and updating our gaming law should be driven by thoughtful consideration of the impacts on the commonwealth, our residents, and the industry, not by the potential revenue generation. 
 
I believe my proposal is fair, comprehensive and necessary to move our industry forward.  I hope you will join me in co-sponsoring this bill.